Australia's Wine Producers May Lose Out Under Henry Tax Review

by Mary Swire, Tax-News.com, Hong Kong

16 January 2009

With reform of the way alcoholic beverages are taxed in Australia being studied in Treasury Secretary Ken Henry's review of the Australian tax system, the government is being urged not to dismantle the wine equalization tax (WET), which helps to support the country's small and growing wine producers.

The tax system, which was first introduced on October 1, 2004, is supported by the wine industry as it entitles small- and medium-sized wine producers to a rebate of 29%.

However, there is a strong possibility that an ongoing review of the country's taxation system by Treasury Chief Henry could result in the simplification of alcohol taxation, and the Australian wine industry fears that this could lead to the sweeping aside of their favourable tax regime.

At present, the tax structures relating to alcohol are complex, with each different industry (beer, wine and spirits) subject to different tax and rebate schemes. This has prompted the government to consider a more modern, streamlined approach to alcohol taxes, with some arguing that the wine industry is (unfairly) given favourable tax treatment by the government.

One reform which has been put forward is to do away with these separate tax regimes and simply tax beverages according to alcoholic content.

This prospect has led Mike Rann, the Premier of South Australia – the centre of the country's wine producing industry – to write to Henry urging him to leave the WET in place in future tax reforms.

According to Rann, the tax is a positive measure for both wine producers and the government as it generates a substantial amount of tax revenue whilst simultaneously encouraging the country's smaller wine producers.

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